STAFF NEWS & ANALYSIS
Obama: Financial Rescue My 'Most Important Thing'
By Staff News & Analysis - December 24, 2009

As the Senate prepares to pass its version of health-care reform legislation, Obama's advisers have portrayed a highly successful year pushing important bills through Congress, comparing his record to those of Franklin D. Roosevelt and Lyndon B. Johnson. Presidential scholars offer a more cautious appraisal, even as they note that Obama is operating in a more partisan time in Washington than those Democratic predecessors had. Obama's legislative record includes the $787 billion stimulus bill passed in February, a mix of tax cuts, infrastructure spending and aid to state and local governments that was the largest of its kind. It also includes a variety of bills addressing issues of particular interest to his political base that had been languishing for years. Although Obama noted in the interview that "the most important thing we did this year was to ensure that the financial system did not collapse," health-care reform dominated his agenda and will stand as at least one pillar of the legacy he leaves behind. He has come under sharp criticism for the size and shape of the legislation, including from former Democratic Party chairman Howard Dean, who has said he would prefer that the Senate defeat the bill rather than pass what he considers weak legislation. In the interview, Obama vigorously defended the legislation, saying he is "not just grudgingly supporting the bill. I am very enthusiastic about what we have achieved." "Nowhere has there been a bigger gap between the perceptions of compromise and the realities of compromise than in the health-care bill," Obama said. "Every single criteria for reform I put forward is in this bill." – Washington Post

Dominant Social Theme: FDR (New Deal) and LBJ (Great Society) were great American leaders … just like America's Nobel prize winning president. Obama (the New Dealer) will save the day!

Free-Market Analysis: So President Barack Obama believes that ensuring the financial system did not collapse was the "most important thing" he did this year. Well, what about the unemployment thing which many analysts put above 20 percent (and we think may be closer to 30 percent in the US)? Or the collapsing euro in that European Union thing? Or the increasing evidence of fraud in that Climategate thing? These are all things that things within the real world would tend to cast doubt upon, if you want to look at those things that way.

And we do. From our humble point of view (and the view of millions of unemployed) perhaps it would have been better to let Western economies collapse rather than try to stabilize them. They are collapsing gradually anyway. Pumping trillions into Western economies has for the most part propped up dying businesses – and the result is that capital can't flow efficiently to new businesses. The thing that Obama (and other Western leaders) helped accomplish is the prolonging of this devastating downturn by ensuring that price-points were obscured and new ventures could not be quickly formulated because the old ones were in the way.

Are "things" really working so well in the real world. The Drudge Report (www.drudgereport.com) links to four articles that seem to indicate otherwise …

Recovery not as strong as previously thought …

The economy grew at a 2.2 percent pace in the third quarter, as the recovery got off to a weaker start than previously thought. However, all signs suggest the economy will end the year on stronger footing. The Commerce Department's new reading on gross domestic product for the July-to-September quarter was slower than the 2.8 percent growth rate estimated just a month ago. Economists were predicting that figure wouldn't be revised in the government's final estimate on third-quarter GDP. The main factors behind the downgrade: consumers didn't spend as much, commercial construction was weaker, business investment in equipment and software was a bit softer and companies cut back more on inventories, according to Tuesday's report. (- AP)

Stocks shaken by weak housing report …

Stocks clung to modest gains Wednesday after a surprise drop in new home sales damped optimism about the economic recovery. The Dow Jones industrial average (INDU) was down 9 points, or 0.1%, about 45 minutes into the session. The S&P 500 index (SPX) lost a fraction of a point. The Nasdaq composite (COMP) rose 4 points, or 0.2%. The Commerce Department said new home sales posted the biggest decline since April. Sales fell 11% last month to an annual rate of 355,000 units from a downwardly revised 400,000 units in October. (- CNN Money)

Small-business bankruptcies rise 81% in California …

With credit tight and consumers still pinching their pennies, many business owners find they can't go on. The Obama administration's new plan to give a boost to small businesses reflects continued trouble in that sector, which is facing new failures even as much of the nation's economy is stabilizing. As credit lines have shrunk and consumers have cut back on spending, thousands of small businesses have closed their doors over the last year. The plight of struggling firms has been aggravated by the reluctance of banks to lend money, said Brian Headd, an economist at the Small Business Administration's office of advocacy. "While bankruptcies are up, overall, small-business closures are up even more," Headd said. California has been particularly hard hit. The latest data show small-business bankruptcies up 81% in the state for the 12 months ended Sept. 30, compared with the previous year. Filings nationwide were up 44%, according to the credit analysis firm Equifax Inc. The actual number of small businesses in trouble is probably higher, experts said, because many owners file for personal bankruptcy rather than seek protection for the business. (- LA Times)

Unemployment calls overwhelm server …

Unemployment claims have been flooding into the state Department of Labor, dragging the filing system to a crawl. "Due to the high volume of claim filing, you may experience some difficulty filing your claim via the Web or by telephone. We apologize for any inconvenience," the Web site says. A spokeswoman says the Department of Labor issued 156,673 benefit checks during the week of Dec. 13-19, up nearly 50 percent from 105,431 last year. The agency has been "incredibly busy" with claims and was "flooded with calls," she said. (- NBC Conn)

NOTED: Big Pharma Payoff: Hidden Tax on Pedialyte, Prenatal Vitamins, and Pain Relievers … If you want to see how Obamacare will hit you and your family in the wallet, look no further than the inside of your medicine cabinet. Open the cabinet door and you may see an antihistamine such as Claritin for allergies, pain relief medicine such as Tylenol or Excedrin, Pedialyte to prevent your kids from becoming dehydrated when they are sick, and prenatal vitamins if you and your spouse are expecting another one. All of these items in your cabinet have two things in common. One is that they are classified as "over the counter" (OTC) medicines and available without a doctor's prescription. The other is that if you pay for any of these items with money in your flexible spending account (FSA) or health savings account (HSA) – and according to this guide from FSA administrator Benesyst, all of these are eligible expenses – you will face an effective tax increase of up to 40 percent on these items in the health care bill that passed the U.S. House of Representatives and is poised to pass the U.S. Senate. (Breitbart Big Government)

After Thoughts

The various administrations of Western countries, at the cost of trillions, have bailed out the current system for the moment. But what this means is that the fiat money that has been printed and shoved like a tidal wave into commercial bank coffers has merely propped up the dysfunctional central banking system that got the West into this mess in the first place. Banking – as it currently constructed – has little to do with the real economy, which will recover gradually as the distortions are wrung out of the system. Propping up the central banking economy, the "thing" Barack Obama seems very positive about, has only delayed the recovery of what is left of the real economy in America and generally prolonged the agony of the ongoing economic crisis around the world.

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